Sonic Boom: Napster, P2P and the Battle for the Future of Music. John Alderman

additional hardware and set out to show it to the world. Sammy Hagar, fresh out of Van Halen, a friend of Kearby’s, offered to put up a single from his first post – Van Halen album, Salvation on Sand Hill. Both Hagar and Liquid were happy with the consumer response. “The reaction was pretty immediate at the pro-media level,” Kearby said, claiming 100,000 downloads for the song. There was an added benefit of generating that same number of addresses for a Hagar e-mailing list. This list concept was key in strengthening artists’ abilities to market themselves and loosen the grip of the industry. “We saw the Internet as a way for musicians to be able to sell their music without having to get record contracts,” said Kearby.

      The Liquid system was threefold. There was the encoding software, called the Liquifier, which used the AAC compression, a stronger, better-sounding format than MP3. To send Liquid files over the Net, the Liquid Music Server was needed. In addition to standard file-server functions, the Server encrypted every music file and slapped a watermark in it for good measure. Only those listeners with a Liquid Music Player positively identified as the owner of a certain song were allowed to play it. If anyone else tried, they were redirected to a commerce site where they might purchase a copy for themselves.

      Once a song was downloaded, listeners were allowed to burn one copy to a CD, provided they had such a burner. Overall, what customers got was a process that left them with pretty much what they would get if they bought their music at a record store, minus a little sound quality and the CD booklet. Liquid Audio made retailers nervous, but was still familiar to the industry compared to much of the Net, inasmuch as it spoke a language that retailers were familiar with and changed the business in terms they understood. When Liquid launched, MP3 was still essentially underground.

      Despite tools such as e-mail registration that would help artists to control their own marketing, Liquid was very careful not to rock the boat within the establishment and worked hard to stay on friendly terms with everyone.

      “When I started the company I had a mantra that was: ‘empower those in power,’” said Kearby. “It just seemed like such a complex food chain that almost anybody could veto you. When we started, my partners Rob and Phil and I diagrammed the music food chain and made sure that the Internet provided a positive value proposition for everyone from the recording studio owner, through the distributor, through the collection agency through the retailer and then ultimately the consumer. We were often accused of doing too much, but when you’re inventing an industry.… It wasn’t like Henry Ford had any choice but to put four wheels on a car. You’ve got to do the whole thing.”

      Liquid Audio’s insistence on copy protection and other industry-friendly gestures still did not appease all quarters. The industry remained wary. Kearby presented a demo—a song produced by the legendary hit man Phil Ramone—at the offices of online music retailer N2K (later acquired by CDNow). Kearby took the group through all the steps: paying for the song, downloading and then burning it to disc, just as Liquid Audio hoped consumers would. Playing the CD back and comparing it to the original on “a very high-quality set of speakers” impressed everyone. Ramone himself, Kearby related, turned to him and said, “This is gonna piss a lot of people off!”

      The people that Liquid was most likely to disturb were the ones who had the most to lose from an Internet sales model: the brick-and-mortar retailers who weren’t set up to sell on the Web. In September 1997, their fears were stoked. Capitol records planned to release “Electric Barbarella,” a single from a new album by the ’80s new wave glamour boys Duran Duran. The company wanted not only to release the single in the Liquid format, but also, contrary to advice by Liquid, release it online—before it made it to retail. The retailers were immediately displeased. Phil Ramone was right: The Net has the capability of offending, or disintermediating, everybody. Capitol backed down after retailers threatened to boycott the CD, and the song was released on the Net and in stores simultaneously. Retailers needn’t have worried so much: few consumers were receptive to buying music through such an untested system, and nothing very sexy was there to lure them to experiment.

      Although Glaser’s RealNetworks and Kearby’s Liquid Audio achieved their own brand and degree of success, neither company was prepared for the tidal wave that MP3 rode in on. And while being tied so heavily to their own proprietary system may prove to be a long-term blessing, as the wealth of MP3-based innovation began to spring up around the Web, it was hard to see the format as anything but a curse, especially for Liquid, which was such a direct competitor. Until 1999, only the Liquid Player could play its specialized format. While the Player had loads of great features, including the ability to display cover art and integrate commerce, it was next to impossible to get music fans to download and install it when they had such a wide choice of other, more enticing options. Namely, free music.

      If the successive waves of online music pioneers included many who were pushing the technological, social, and legal limits for a mixture of aesthetic hopes and utopian dreams, what pushed MP3.com founder Michael Robertson was something different. He hadn’t cared very much about music since ending a brief stint playing clarinet in his high school band, and the first time he even noticed the term MP3s was when he saw how popular it was as a search word on a Web site he was running. But Robertson was a natural-born capitalist.

      “Well, you know, I grew up really poor,” Robertson said once in an unguarded moment. “I think that has a way of motivating people, and I do have the entrepreneurial bug. Hopefully, after three companies, maybe I got it right with MP3.com.”

      Blond, boyish-looking, and with the constantly upbeat manner of a salesman or a preacher, Robertson grew up in San Diego, California, in a very religious family with modest means. Not interested in more of the same for himself and his kids, Robertson meticulously transformed himself into a notoriously hard-driven entrepreneur. After receiving his B.A. in cognitive science from University of California San Diego, he jumped into the world of high tech by starting two successive software companies, MR Mac and Media Minds. The first was a networking and security consultancy, for which his enthusiasm faded when he realized how hard it was to scale to something really big. Software didn’t have that limitation—although one body could only do so much consulting, one program could travel anywhere. Media Minds made imaging software, tools for managing digital photos; it wasn’t very successful, Robertson contended, because it was ahead of its time. To have that much experience under his belt while not yet thirty was priceless.